Improvement in asset quality and financial position affirmed the Bank’s readiness for 2020 both IFRS 9 implementation and the merger roadmap
TMB Bank Public Company Limited or TMB and its subsidiaries on January 24, 2020 announced its 2019 financial results. Mr. Piti Tantakasem, CEO, commented on the overall performance that 2019 was considered a challenging year due to macroeconomic environment and various changes in banking industry while TMB itself was executing the M&A deal. TMB, therefore, remained prudent through the year and put priority on improving loan portfolio quality and strengthening financial position. Moreover, TMB started to build readiness for the merger plan such as lending rate calibration of the two banks, liquidity free-up for hire purchase portfolio expansion and the sales of TFUND to affirm mutual fund open architecture strategy of TMB. From these initiatives, the Bank is confident for the new chapter involving IFRS 9 implementation and the integration plan in 2020.
After the completion of TBANK’s share purchase transaction on 3 December 2019, TMB’s consolidated financial statement would include TBANK’s financial performance as one of its subsidiaries. TMB’s consolidated balance sheet would combine TBANK’s ending 31 December 2019 performance while consolidated profit and loss statement would include only financial results during 4-31 December 2019.
At year-end 2019, TMB reported total assets on consolidated basis of THB 1.9 trillion, doubling from THB 0.9 trillion as at year-end 2018. Consolidated deposit also grew to THB 1.4 trillion from THB 0.6 trillion as a result of the acquisition of TBANK’s deposits and a continual growth of TMB’s flagship products, TMB All Free and TMB No-Fixed. Meanwhile, consolidated loans rose to THB 1.4 trillion from THB 0.7 trillion essentially from the addition of TBANK’s hire purchase portfolio and positive momentum of TMB’s retail mortgage loan growth.
For the 12-month period of 2019, operating income on consolidated basis was reported at THB 39,821 million, down from THB 48,042 million in the previous year. Such a decline was due to high base effect comparison as in 2018, TMB recognised one-time gain of THB 12 billion from the sale of 65% in TMBAM stake. With the gain, Non-Interest Income (Non-NII) was reported at THB 23,545 million in 2018, higher than THB 12,956 million in 2019. However, if excluded TMBAM gain, Non-NII in would grow around 11% in 2019. And when combined with Net Interest Income (NII) which increased to THB 26,865 million or up 9.7% YoY due mainly to higher interest on loans and the consolidation of TBANK’s interest income from hire purchase and lease, total operating income in 2019 would improve by approximately 10%.
In terms of TFUND’s share sale transaction, TMB would recognise the sale transaction from TBANK as TMB’s subsidiary. However, TMB would not record gain from this sale because TFUND was already recognised at fair value on TMB’s book. Consequently, TMB would not book gain from the sale of 25.1% stake in TFUND made by TBANK in the 4th quarter. For the remaining stake of 49.9% in TFUND held by TBANK, TMB would recognise the revenue from the holding as profit sharing from associate company.
On the expense side, TMB reported operating expenses (consolidated) of THB 20,674 million which rose 18.3% from last year. The increase was partly from the recognition of TBANK’s operating expenses. Another reason was that in 2019, there were one-time expense items, including the set-up of employee retirement benefits according to the revision of the Thai Labour Protection Act. and M&A advisory fee.
TMB set aside provision of THB 10,337 million for 2019, in line with the Bank’s direction to improve its loan portfolio quality. After provision and tax, TMB reported 2019 net profit of THB 7,222 million, down from THB 11,601 million in the previous year. The decline was due to high base effect from extra-income in 2018 and one-time expenses items incurred in 2019 as mention earlier.
Asset quality has improved as planned, TMB (bank-only) could reduce NPL ratio to 2.33% from 2.76% last year. The Bank could also maintain its coverage ratio as target at 140%. On consolidated basis, NPL ratio was at 2.30% and coverage ratio remained at high level at 120%.
In terms of capital adequacy, preliminary CAR and Tier I (consolidated) at year ended 2019 are expected to be at 17% and 13%, in line with Basel III and well-above mini the Bank of Thailand’s minimum requirement of CAR at 11.0% and Tier 1 at 8.5% respectively.
Mr. Piti Tantakasem concluded that “The new management team, which has been formed from the collaboration between the two banks, is ready for 2020 and for the integration mission to enhance the Bank’s capability to better serve our customers which have reached 10 million. The 2020 target is to be discussed at the next board meeting.”